Sejong Telecom, 'Vbrick' Faces Opinion Disclaimer Due to Massive Losses and Embezzlement... Designated as a Management Item① [Listed Companies at a Crossroads]

[Asia Economy Reporter Jang Hyowon] It has been revealed that B-Brick, a subsidiary of Sejong Telecom, suffered massive losses due to cryptocurrency operations. In response, B-Brick has filed a complaint against the responsible executive on charges of embezzlement and breach of trust. As a result, Sejong Telecom received a disclaimer of opinion on its semi-annual review report and was designated as a management stock.

According to the Financial Supervisory Service's electronic disclosure on the 17th, Sejong Telecom announced that it received a "disclaimer of opinion" from the audit firm on its semi-annual review report the previous day. The disclaimer of opinion on the semi-annual review report led to a temporary suspension of trading due to the designation as a management stock, but trading resumed the following day.

The reason Sejong Telecom received the disclaimer of opinion is due to its subsidiary, B-Brick. B-Brick is a blockchain consulting and development company in which Sejong Telecom invested in 2019. In July 2020, Sejong Telecom was selected for the Busan Blockchain Regulatory Free Zone project and opened the real estate fractional investment platform BBRIC last year.

This platform is a fractional investment platform operated by the "Sejong Telecom Consortium," consisting of Sejong Telecom, B-Brick, Aegis Asset Management, and DS Networks Asset Management, using the STO (Security Token Offering) trading method based on real assets. B-Brick, a subsidiary of Sejong Telecom, is responsible for the development and operation of this app. In April, it publicly offered the Choryang MDM Tower near Busan Station.

Notably, B-Brick's co-CEO is Kim Seonghoon, the son of Kim Hyeongjin, chairman of Sejong Telecom.

Separately from the platform business, B-Brick also operates a virtual asset management business. In February and November of last year, B-Brick signed "cryptocurrency account usage (rental) contracts" with two domestic cryptocurrency exchanges and managed virtual assets.

B-Brick contracted with cryptocurrency exchanges to borrow cryptocurrencies owned by the exchanges or entrusted by customers, operate them, and receive a portion of the profits. According to the contract, B-Brick was only allowed to operate the borrowed cryptocurrencies and was prohibited from transferring or pledging them to third parties.

However, B-Brick provided the borrowed cryptocurrencies from the exchanges as collateral to third parties and borrowed other cryptocurrencies to operate. In this process, B-Brick is estimated to have incurred losses of 44.1 billion KRW as of the end of the first half of this year.

Currently, the executive in charge of virtual asset management at B-Brick is reported to have deleted the transaction and work instruction records related to this matter. B-Brick has filed a complaint against this executive on charges of breach of trust and embezzlement.

B-Brick reflected the estimated loss of 44.1 billion KRW as a net loss for the current period. Accordingly, Sejong Telecom recorded a net loss of 53.9 billion KRW despite an increase in sales and a turnaround to operating profit on a consolidated basis compared to the same period last year. On the 11th, Sejong Telecom sold 48.99% of its shares in B-Brick and currently holds only 5.8%.

Sejong Telecom's audit firm stated in the semi-annual review report, "We were unable to obtain sufficient and appropriate audit evidence regarding the completeness of B-Brick's cryptocurrency transactions, the appropriateness of the estimated loss amount, and the appropriateness of the allocation of the loss amount by fiscal year."